The housing market is in a continuous decline and the technology sector weighed down all three major indexes.

Just another sporadic day that has traders looking into every nook and cranny of the stock market to find setups with profitable potential.

Team members at Simpler Trading have been able to peer into the unheeded crevices of the market for trade setups.

Sentiment drives pro level trading plan

The stock market open on Monday and saw a nice gap higher, but ultimately the move wasn’t sustainable.

Why?

Sentiment, according to Henry Gambell, Senior Managing Director of Options Trading at Simpler Trading.

Sentiment in trading considers how investors or traders are viewing the market or a specific equity. Positive or negative attitudes from market participants can affect overall price movement of the market or equities.

Henry tracks the S&P 500 (SPX) to find potential plays in this unsettled market.

“It’s really been a point of focus for many traders,” Henry said. “It’s also space where I feel like I’ve seen pretty decent road maps, or a technical point of view that has been generally well respected.”

Henry tracks these “road maps” with a strategy centered on the Voodoo Lines® indicator. Voodoo Lines automatically predict future support and resistance levels on stock charts and help traders quickly recognize moves with the greatest profit potential.

Henry ties his chart indicators into sentiment readings such as the put/call ratio. The put/call ratio is the ratio of the volume in trading between the put options trading and the call options trading. Traders and investors use the put/call ratio to measure the market and to gain a better understanding of its sentiment.

An important level on the SPX currently, when using the put/call ratio, is at .6.

“It will help you make better decisions in certain spots,” Henry said. “When you gap up into technical resistance and the put/call ratio is down near .6, that generally shows us that market participants could be chasing it through the purchase of calls. That’s usually not going to work.”

Market sentiment holds more importance in options trading than many traders may understand.

“I continue to find this to be an important part of using market sentiment to try and help make my best trading decisions,” Henry said.

Search for next trade is ongoing process

Search for next trade is ongoing process

One thing traders must understand when trading this market is that searching for the next trade is an ongoing process.

When market conditions present a challenge, Allison Ostrander, Director of Risk Tolerance at Simpler Trading, fires up her scanner and gets to work.

Her recent scans targeted trades that might present both bullish and bearish momentum in choppy market conditions. Tickers meeting this criteria would fall into an established pattern that fits her trading plan for potential trades.

One ticker that stood out was Blackstone, Inc. (BX). 

“I like how the intraday charts look to try and play this trade to the downside,” Allison said.

She has followed price on the BX stock chart holding moving averages as resistance, some consolidation on the Bollinger bands and a squeeze on different time frames. BX appears to 

be rolling off the 100-day simple moving average, so Allison is looking for price to go lower.

BX closed slightly down on Tuesday by .63% to $83.66.

“Overall I like how BX is setting up both on the smaller intraday charts all the way up into the weekly timeframe,” Allison said.

Depending on an individual’s trading plan, BX could be played conservatively or with some added risk. Allison is looking at a bearish setup for this trade with some caution for how the overall market is shifting.

“Be mindful of your risk in this overall market chop,” Allison said.

Traders can follow Henry and Allison in the online chat rooms at Simpler Trading.